An income tax panel refused to stay a demand of Rs 110 crore on Flipkart, India’s largest online retailing platform, after it was asked to reclassify discounts and spending on marketing as capital expenditure.

The development may have implications on rival Amazon, which faces a similar liability, and others.

The Income Tax Appellate Tribunal (ITAT) in Bengaluru asked Flipkart to deposit Rs 55 crore and provide bank guarantees to the tune of Rs 55 crore by February 28. While the tax assessed is for 2015-16, similar demands may be made for subsequent years. Hearings will continue after February 28.

Why has Flipkart been told to pay?

Currently, companies categorise discounts and marketing costs as revenue expenses, while spending on factory construction is categorised as capital expenditure. If discounts are classified as capital expenditure, Flipkart, which otherwise incurs a loss, becomes a profit-making entity and liable to pay domestic taxes.

Taxi-hailing companies Uber and Ola follow a similar model of offering discounts to consumers, although there is no such tax demand on them.

The revenue authorities demanded taxes about Rs 110 crore on an estimated profit of Rs 408 crore for the financial year 2015-16, when Flipkart originally reported a loss of Rs 796 crore. The income tax department’s stand is that discounts and large marketing costs are part of brand building. Read more.

Paytm Mall, in which Chinese internet giant Alibaba and its payments affiliate Ant Financial hold a majority stake, is chalking out tighter integration with players like online grocer BigBasket and logistics company XpressBees as they build out their ecosystem. Alibaba Group has recently invested in BigBasket, XpressBees and restaurant discovery and food delivery platform Zomato.

Working with these companies will help Paytm Mall, which claims it will exit FY18 at a gross merchandise volume (GMV) run rate of $3 billion, target an ambitious $10 billion run rate by end of FY19.

What does this mean for Paytm Mall and the customers?

Just a few weeks into Alibaba’s investment in BigBasket, Paytm Mall is in the process of integrating BigBasket on its platform and mobile app and is expected to be up and running in the next 3-4 months.

What this means for customers is that they would be able to purchase grocery from BigBasket through the Paytm platform as well, a revenue-sharing, exclusive partnership between the two players.

This integration also means that Paytm Mall, which is currently positioned as the number three Indian e-commerce player and BigBasket, which is a market leader in the Indian online grocery space, have now joined forces to compete with e-commerce incumbents Flipkart and Amazon India, both of which are making an aggressive push into this space.

More than half of Paytm Mall’s overall orders trickle in from grocery and FMCG, which is expected to go up to 60% with the BigBasket partnership. Read more.

Online food delivery service Foodpanda India will be shelling out Rs 400 crore over the next 12 months to further build its logistics and delivery operations along with its technology stacks, as the once-market leader looks to take on its cash-rich rivals and regain lost ground.

Foodpanda India was acquired by ANI Technologies, which also owns and operates ride-hailing app Ola.

What will they do with the money?

The company, which has about 4,500-5,000 riders currently, will ramp that up to about 25,000 over the course of the next 12-15 months.

Foodpanda India, which claims to be in about 130 towns and cities across the country, will be doubling down on about 10 cities, which constitute about more than 50% of the overall orders received by the food delivery companies. Read more.

The Tata group has approached key shareholders of Hector Beverages with a proposal to buy out the company along with its popular brand Paper Boat to spice up the portfolio of group company Tata Global Beverages (TGBL).

Why is Tata interested?

Tata Sons chairman N Chandrasekaran has been keen to add fizz to the group company, wanting them to move beyond its tea, coffee, and water offerings, and leapfrog into a holistic food and beverage (F&B) powerhouse such as PepsiCo or Nestle, said group officials.

Tatas are believed to have identified dairy as a possible extension option and have also made appointments at TGBL to steer such initiatives. Similarly, beverages and healthy ethnic snacks have been identified as another area of growth for TGBL, the world’s second-largest branded tea company.

Local snack brands have already been identified and Paper Boat is one of the brands. Even though a formal approach has been made, the talks around Paper Boat are still at an exploratory stage and there is still no guarantee that it will lead to a transaction. Read more.